Despite the many advantages of doing business in Singapore as an employer, the country’s tax laws are onerous. Many forms must be filled out when it comes to paying taxes, such as IR21, which is one of many documents you should expect to fill out. If you’re curious, there might be severe financial penalties if you don’t submit it on time.

As a precautionary measure, this piece provides some essential insights on the IR21 controversy. In this guide, you’ll learn everything about Form IR21, including what it is, how to use it, when to file it, when not to file it, and when to use it.

Form IR21 explains what it is and how it is used

In contrast to other forms, such as the IR8A, the IR21 does not have to be completed every year. The exception is if your foreign employee (including Singapore Permanent Residents) leaves the country for a period of time exceeding three months, accepts a contract outside of Singapore, or terminates his or her employment connection with you.

IRAS requires IR21 Form, which must be filled out in order for the absent employee to be granted clearance by the IRAS.

But there’s more to it than that. Additionally, you must withhold all of the employee’s wages throughout this procedure to guarantee that taxes are paid on time.

On the whole, the IR21 may be seen as a tax clearance process for Work Pass holders who have to quit their current assignments. The main distinction is that their employer is in charge of preparing and submitting the necessary documentation and securing permission.

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It’s Important to Know About Form IR21

Alternatively, Form IR21 is Singapore’s method of stopping tax evaders from escaping punishment. Employees who have outstanding tax debts cannot leave the nation under IR21, which makes it very difficult for them to leave the country.

To comply with Singaporean law, enterprises must use IR21 to notify the Inland Revenue Authority of Singapore one month before a departing employee’s departure. As a consequence, employers may only release the money that has been kept once the IRAS has cleared the employees.

When is tax clearance not required?

If your employee falls into one of the following categories, you do not need to get IR21 tax clearance:

  • You have to be a citizen of the Republic of Singapore.
  • Your job with a Singapore Permanent Resident (SPR) has come to an end. This SPR will not be leaving the nation permanently.
  • Non-citizens of Singapore are undocumented employees who have worked for three years or more and earned less than S$21,000 per year.
  • More than 183 days of employment over two years, earning less than S$21,000 per year, does not necessitate Singapore residence for undocumented employees.
  • It is a self-employed status for non-Singapore citizens who work more than 183 days in a calendar year and earn less than S$21,000 in a year.
  • Only professionals, public performers, and corporate directors who work a total of more than 60 days in a calendar year are not considered non-Singapore citizens.

If the following requirements are satisfied, the IRAS is compassionate enough to exempt employees who are deployed abroad:

The job assignment overseas does not last more than six months.When an employee returns to Singapore after an abroad assignment, their employer provides them with a work visa so they may continue their duties at the same business.They are paid by their Singapore employer no matter where they are working.